Buying a car through LTD

paul7g

Hello,

This has been posted a few times, so apologies, but I understand some of the government rules and regulations change from time to time.

Can anyone provide any information on buying a car through a LTD company using the following use cases.

Car A
- Brand new car costing €40,000
- Not a commercial vehicle
- Petrol

Car B
- Second hand car costing €20,000
- Not a commercial vehicle
- Petrol


Questions
1. Can you claim the VAT back?
2. How much BIK would you pay?
3. Any benefits going to the UK from a LTD point of view (other than a cheaper car, potentially)?
4. Can you buy a second car through the company too, and what are the knock on effects of buying a second?
5. Difference in buying from a garage (VAT registered) VS private sale?

Any other information would be great appreciated. Thank you in advance for your help.

Mr Clonfadda

1. NO
2. BIK depends on mileage done and the Original Market Value of the Car.
3. Not that i know of
4. Yes. More cost to pay
5. Only if it is a commercial vehicle would it make a difference apart from warranty

paul7g

Thank you for your help.

2. If the car cost €40,000 new, how much would the BIK cost?
4. Can you elaborate on this please?

EndaHonesty

paul7g wrote: »

Thank you for your help.

2. If the car cost €40,000 new, how much would the BIK cost?
4. Can you elaborate on this please?

Cost is based on the annual mileage;

http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/private-use-cars.html#section6

BIK based on OMSP makes a company car very expensive here in Ireland.

Why don't you just buy the car personally and charge mileage to the company?

Mr Clonfadda

OMV (Original market value) = €40,000

business KM only

<24,000 Km is 30% of OMV = BIK of €12,000 per Annum
24,001 - 32,000 KM is 24% of OMV = BIK of €9600 P.A.
32,001 - 40,000 Km is 18% of OMV = BIK of €7400 P.A.
40,001 - 48,000 Km is 12% of OMV = BIK of €4,800 P.A.
48,001+ KM is 6% 0f OMV = BIK of €2,400 P.A.

my comment on 4 is two cars are more expensive to have. ie 2 x Insurance & Tax

I would reccommend you go the private Car route as well

cart man

Mr Clonfadda wrote: »

OMV (Original market value) = €40,000

<24,000 Km is 30% of OMV = BIK of €12,000 per Annum

To be clear, taking the first example, it does not cost you €12k, €12k notional value is added to your pay to determine taxable amount, therefore (assuming higher rate tax) it will cost net approx €6200.
Running a private car of a similar value will net cost you significantly more.

cart man

Mr Clonfadda wrote: »

OMV (Original market value) = €40,000

<24,000 Km is 30% of OMV = BIK of €12,000 per Annum

To be clear, taking the first example, it does not cost you €12k, €12k notional value is added to your pay to determine taxable amount, therefore (assuming higher rate tax) it will cost net approx €6200.
Running a private car of a similar value will net cost you significantly more.

Mr Clonfadda

cart man wrote: »

To be clear, taking the first example, it does not cost you €12k, €12k notional value is added to your pay to determine taxable amount, therefore (assuming higher rate tax) it will cost net approx €6200.
Running a private car of a similar value will net cost you significantly more.

yes BIK in example is the notional benefit that is taxable. What that ultimately costs you is very much dependant on other earnings and personal tax credits and Standard rate cut-off Point

paul7g

Thank you for all of the help, much appreciated.

Mr Clonfadda

Mr Clonfadda wrote: »

OMV (Original market value) = €40,000

business KM only

<24,000 Km is 30% of OMV = BIK of €12,000 per Annum.............

cart man wrote: »

To be clear, taking the first example, it does not cost you €12k, €12k notional value is added to your pay to determine taxable amount, therefore (assuming higher rate tax) it will cost net approx €6200.
Running a private car of a similar value will net cost you significantly more.

Well to be clear if the company is owned by the chap who will drive the car than a €40k car bought with company cash that will result in tax of €6200/annum isn't going to cost significantly less than one privately bought.

€18600 tax for 3 years motoring is a fair ole bill. It's his pre tax money is buying the car anyway. The beauty of the tax system is Ireland is that BIK makes these sort of things not overly great a pocket liner when everything is considered.

Of course you get the motor tax, insurance, tyres, fuel and maintenance etc all company paid (half price essentially) but a company car is really isn't overly advantageous when not doing many business miles if it's your own company funding it.

If buying a €40k commercial where you get the VAT back, 8 year depreciation through the books and only 5% BIK it makes some sense.

paul7g

Thanks Augeo, and everyone else for their input.

I think it makes sense to sell my own personal car, pocket the money of the sale, and then buy a car through the company, considering I am using my car 90% of the time for business, albeit I don't have to travel too far (less than 7000 miles per annum)

Can someone provide me with the maths on the cases below please.

A - Company A

1. Company A buys new car for €40,000 cash (no loan or pcp schemes)
2. I pay myself €50,000 per annum
3. I do 8000km per annum

How much BIK do i pay per month / annum?

B - Company B

1. Company B (another company I have) buys new car for €40,000 cash (no loan or pcp schemes)
2. I am not an employee as such (I don't pay myself a wage, but do employee 4 other employees)

How much BIK do i pay per month / annum? (or maybe i can't do this as I am not paying myself with this company, albeit I work several hours on it each day)

paul7g

paul7g wrote: »

Thanks Augeo, and everyone else for their input.

I think it makes sense to sell my own personal car, pocket the money of the sale, and then buy a car through the company, considering I am using my car 90% of the time for business, albeit I don't have to travel too far (less than 7000 miles per annum)

Can someone provide me with the maths on the cases below please.

A - Company A

1. Company A buys new car for €40,000 cash (no loan or pcp schemes)
2. I pay myself €50,000 per annum
3. I do 8000km per annum

How much BIK do i pay per month / annum?................

As per the before, BIK will be €40,000 * 0.3, taxed at higher rate so out of pocket tax of €6200/annum.

Essentially the car will cost €40000 out of the company, you could say that to get €40k out of the company into your pocket in addition to your salary you'd have to pay yourself €80k so you'd have paid €40k in income tax to get the €40k after tax to buy the car privately.

BIK than levels this, keep the car 6 years and you pay 6 x €6200 = €37.2k

Example B is no different really unless you can adjust tax credits to pay BIK at the lower rate rather than the higher rate.

Unless you are doing sufficient business miles to reduce the BIK rate the only advantage of having a company car when you own the company is half price ish insurance, motor tax, fuel (60% off ish if diesel due to VAT) & servicing etc.

If you are getting the benefit of a car BIK is designed to ensure you are taxed on it, if you work for a company that's not your own that's fine as they are funding the car and you pay the BIK so it's still a perk.
However, if you own the company and instead of buying the car you can pay yourself the salary if you go the car route BIK will level the playing field.

Now I can see the advantage in using €40k company money to buy a car rather than needing to pay yourself €80k to buy the same car privately of course

Mr Clonfadda

BIK €12,000 per annum or €1,000 per month

Cost to Individual (assuming nigher rate of Tax)
PAYE €400 pm
PRSI 'EE' €40 pm
USC €80 pm
Total per month €520

If you kept existing car personally doing 7,000KM, for business, you can claim "milage" expenses of €3,962.57 tax free per annum, from company

First 6437KM is claimable at 59.07c per Km after this 28.46c per KM (Different rates for engines under 1501 cc)